Down payment: tiers & sources
How much cash you need up front depends on the price of the home, and where that cash comes from is a rule of its own.
In Canada the minimum down payment is set by a sliding scale, not a flat percentage. On a home priced at $500,000 or less, the minimum is 5% of the price. Above $500,000, it's 5% on the first $500,000 plus 10% on the portion above that. So a $700,000 home needs $25,000 (5% of $500K) plus $20,000 (10% of the next $200K), for $45,000 total, not a flat 5%. Once the price passes $1.5 million, none of this applies: those mortgages can't be insured, so you need at least 20% down. (That $1.5M ceiling rose from $1M on December 15, 2024.) A "down payment" is the cash you pay up front; the rest is the mortgage.
The reason the tiers exist is mortgage default insurance. If you put down less than 20%, the lender requires insurance (from CMHC, Sagen, or Canada Guaranty) that protects the lender, not you, if you stop paying. You pay the premium, usually added to the loan. Put down 20% or more and the mortgage is "uninsured," no premium, but you're supplying a lot more cash. Insurers set the 5%/10% minimums and the $1.5M cap, which is why crossing those lines changes the math so sharply.
You don't have to save every dollar yourself. A gifted down payment, money from an immediate family member with no repayment expected, is allowed, including for the full amount. The lender will want a signed gift letter stating the money is a true gift and not a loan, plus proof the funds landed in your account. What lenders won't accept is a disguised loan, because a loan you have to repay changes what you can actually afford.
This is where source-of-funds rules come in, and they're stricter than most first-time buyers expect. Lenders must confirm where your down payment came from, usually 90 days of account history, to satisfy anti-money-laundering law and to make sure the money isn't borrowed. A large deposit that appears out of nowhere gets flagged and you'll be asked to document its origin: pay, a sale, a withdrawal from an RRSP or First Home Savings Account, or a documented gift. Cash you can't trace, or funds parked just before applying, can stall or sink an approval, so how you move money in the months before buying matters as much as how much you have.